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We have an LLC and we made some charitable donations from our LLC but this organization is not in the charitable institutions recognized by IRS
We used an expense account named Donations while recording the transactions.
Now my question is when we pull up the Profit & Loss Statement, it is coming as an expense and reducing the profit. Is it still considered as an expense even though the charity is not recognized by IRS.
How could we handle it?
Thank you for visiting the Community today, TheGodKind.
Let me point you in the right direction on how to properly manage our charitable donations.
In QuickBooks Desktop (QBDT), transactions that are tracked using an expense account will show in the Profit and Loss report. That’s why you’re seeing the entries on the statement.
In regard to your industry type, I suggest consulting with your accountant for further assistance. They can guide you on how to record your charitable donations including the account to use.
Once you have the information handy, make sure to add the account to the company file. Then link it to the transactions. Here’s an article that will walk you through the process: Add, edit, or delete accounts.
For future reference, the following reference covers basic information about reports in QuickBooks Desktop: Understand reports. It provides information on how to set your report preferences, customize your statements, memorized them, and set up schedules:
Additionally, this resource contains topics that will guide you on how to perform any accounting tasks in QBDT: Get started. From there, choose the topic and click on the link to view the complete details of the article.
Keep in touch if you have any clarifications or questions on how to track donations and run reports on QuickBooks Desktop. I’ll get back to get this taken care of for you.
If the organization is not a qualified charitable organization, you cannot deduct the amount paid to them as an expense. The IRS does not consider this a donation. You would need to assign the check to an equity account as this payment reduces equity in the LLC. This will move the payment off of the P&L and show as a reduction in equity on your balance sheet.
Thank you so much for the answer! Could you please suggest a sample name for the equity account as I haven't done it before. Thanks again for your help!
It depends on how your LLC is taxed. You mentioned "our" LLC so I assume the LLC is taxed as either a partnership or S-corp? If that's the case, record it as '2022-Distributions'.
Thanks again. Will it be possible to get a 15 or 30 mins phone session with you! Do you offer remote services like that?
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